Principles of Corporate Finance Essay
Added on -2020-07-22
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Principles of corporatefinance
Executive SummaryInvestment is required to be made in the securities so that adequate returns should beachieved by the investors. Price and valuation of shares plays crucial role in the company inorder to accomplish more market base in the best possible manner. Furthermore, investmentshould be made in highly stable securities so that good average returns may be generated andinvestors may be benefited with much ease. Valuation of shares are required to be made bycompany so that both investors and organisation can assess market value of per share in the bestpossible way. The price at which security of Sports Direct International Plc is 148.70 and on theother hand, Inmarsat Plc is 5.29. While, Cairn Energy Plc has 308.96 of share price at the end ofmonth. Moreover, the facts about the investment of 2 million is required to be made. It can beanalysed that investors would get lower returns in the short-run and will get adequate averagereturns in the long-run. Furthermore, securities should be evaluated in effective manner so thatinvestors may garner greater returns. Moreover, various methods of valuation of shares are alsoimportant in selecting securities yielding maximum returns. It is also required that companyshould perform well so that adequate returns can be provided to investors and as such, moreinvestment may be made by them which would be beneficial for the company to effectivelyfinance activities in the best possible way. Furthermore, financial ratios also help to assessperformance of the company and investors can rely on the same.
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1Part 1................................................................................................................................................1Analysis of UK economic situation........................................................................................1Sectorial report on groupings.................................................................................................2Part 2................................................................................................................................................3Investment rationale...............................................................................................................3Assessing financial performance of the companies chosen under different sectors .............3Valuation of shares.................................................................................................................5Ratios analysis........................................................................................................................7Stating the manner in which concerned investment will meet investment strategy.............11CONCLUSION..............................................................................................................................11REFERENCES..............................................................................................................................13
INTRODUCTIONThe principles of corporate finance are important in analysing the performance ofindustry in effective way. Present report deals with investment portfolio of various companies indifferent sectors. In relation to this, Cairn Energy Plc is chosen in Oil and Gas sector, while,Sports Direct International Plc is taken in General Retailers. On the other hand, Inmarsat Plc istaken from the sector of Mobile communication. The investment portfolio is prepared for all thecompanies to assess financial performance and outline company which is earning good profitsand so that investors may take better decision in this context. Valuation of shares are preparedand investment strategy is made as well. Furthermore, analysis of current economic situation isalso explained with regards to GDP, taxation, Balance of Payments and inflation as the economicindicators. Sectorial reports are also listed for three companies of varied industry sectors.Various methods-of-valuation-of-shares are also listed in this report. Part 1Analysis of UK economic situationUK is one of the largest economy in the world and as such, nation has various economicindicators. In relation to this, macroeconomic indicators are GDP, Balance of Payments (BoP),inflation and taxation which impacts overall economy of UK. Current year growth of GDP ofUK at the end of February 2018 is decent and is expected to rise by 1.5 % in the financial year2018. However, as the year will progress, economy will slow down because of the uncertainty ofBrexit on GDP of the nation (Low, Yao and Faff, 2016). Moreover, it is assumed that fixedinvestment and private consumption growth would lower down as well. While, UK's GDP hasbeen injected in the current situation which will benefit whole nation in the coming period. Thisis evident from the fact that in February month, services PMI (Purchasing Managers Index) ishiked four times because of quick new orders growth. Unemployment rate is come down as well.BoP is the economic transactions between UK and Rest of the World. This is narrowedby GBP 2 billion to 0.965 billion at the end of February 2018. Imports of goods and services hasbeen fallen down by 4.8 % which is 53.41 billion in comparison to 56.11 billion in the month ofJanuary. On the other hand, exports of goods and services are also lowered down up to 1.34 %.Thus, it can be said that there is deficit in the UK economy as it is hiked by 0.4 billion to GBP1
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